THE two-month battle for control of UFJ, the huge Japanese bank, is moving into a crucial week as fresh obstacles threaten a resolution to the contest.
A 700 billion yen (£3.6 billion) injection of capital into the UFJ group announced late last week by Mitsubishi Tokyo Financial Group carries terms blocking a rival hostile bid by Sumitomo Mitsui Financial.
But Sumitomo has already countered Friday’s move by extending the September 24 expiry date on its own merger proposal and is tomorrow expected to come up with a new deadline.
That extended deadline could draw out the battle as far as next June, when UFJ shareholders are scheduled to vote on the Mitsubishi deal.
The injection — which was brought forward in an attempt to head off any manoeuvre by Sumitomo — involves the purchase of non-voting preferred shares in UFJ Bank, which is a wholly owned subsidiary of UFJ Holdings.
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Under some circumstances, those shares could be converted into preferred stock.
If that were to happen, Mitsubishi would gain a 30 per cent voting stake in UFJ Bank, and a powerful “poison pill” in defending its bid against that of its rival.
The conditions of Mitsubishi’s injection include a provision under which UFJ Holdings would only be able to buy back the preferred shares from Mitsubishi at a crippling 130 per cent of the price at which Mitsubishi bought them.